Don’t point your finger at China…

“China woes threaten air freight industry, Lufthansa warns.”

That is the title of a news story published yesterday by Bloomberg. And if the title weren’t ominous enough, the lead sentence will surely grab your attention: “Lufthansa, Europe’s biggest cargo airline said it’s concerned that a stock market rout which wiped $3.2 trillion off the value of China’s top companies in less than a month is set to cripple the air-freight industry.”

You can imagine the rest. Doom and gloom, and it’s all China’s fault that our cargo business is suffering.

It’s no secret that China’s stock market has lost almost a third of its value in the last four weeks, and China’s position as the source of a significant portion of the world’s air cargo is also well known. But China is not Europe or the US, and the relationship between its stock market and its industrial output and overall economy is different from the relationship in Europe and the US.

And think about this: How would Lufthansa have reacted if China’s stock market was up 75% from a year ago, rather than down 30% from a month ago? It’s a relevant question, because, as pointed out yesterday by The Economist, both of those statistics are real. Yes, the market has fallen by almost a third in the last month, but that still leaves it up 75% year-over year. And further, the stock market is a relatively small part of the Chinese economy. Again according to The Economist, “the value of freely floating shares is about 40% of DGP, compared with more than 100% in most rich countries.”

This is not to say the market correction (or crash, or bubble-burst, or whatever you choose to call it) in China will have no impact on air freight, but rather to point out that there is more to the problems faced by the cargo departments of the big Western European combination carriers than what happens to the stock market in China. If the connection really were that close, then the doubling in value of the Chinese stock market over the year leading up to the crash should have sent cargo loads soaring at Lufthansa.

I don’t remember that happening, and am reminded of the old cliche “when you point your finger at someone else, remember that there are three fingers pointing back at you.”